Streamlined
Streamlined Domestic vs Foreign Offshore Procedures: Which One Applies to You?
The IRS runs two Streamlined programmes. The Foreign Offshore version carries no penalty; the Domestic version charges 5% of your highest foreign asset balance. Which one you fall into depends on where you lived — and it is not always the one you expect.
The IRS Streamlined Filing Compliance Procedures are the standard route back to compliance for Americans who did not know they had to file. What many people miss is that "Streamlined" is two separate programmes with the same paperwork and very different price tags.
Short answer
- Streamlined Foreign Offshore Procedures (SFOP) — for taxpayers who meet a non-residency test. No failure-to-file, failure-to-pay or FBAR penalties. You pay the tax and interest on the three returns.
- Streamlined Domestic Offshore Procedures (SDOP) — for taxpayers who do not meet the non-residency test. Same filings, plus a Title 26 miscellaneous offshore penalty of 5% of the highest aggregate year-end balance of the foreign financial assets that should have been reported, across the six-year FBAR period and three-year return period.
Both require that your failure was non-wilful — negligence, inadvertence, mistake or a good-faith misunderstanding of the law — and both are unavailable if the IRS has already opened an examination of any of the years involved.
The non-residency test, in plain terms
For a US citizen or Green Card holder, you meet the test if in at least one of the three most recent years for which the return due date has passed you:
- did not have a US abode, and
- were physically outside the United States for at least 330 full days.
Only one qualifying year is needed. Someone who moved to the UK four years ago and has been here since will normally qualify easily. Someone who moved eighteen months ago may not — if none of the three years has 330 full days outside the US, the domestic procedures apply even though they now live in London.
An "abode" is about your home ties — where your family, economic and personal life is centred — not just an address. Keeping a house in the US that you return to can be a problem; owning a rental property you never live in generally is not.
What both programmes require
| Foreign Offshore (SFOP) | Domestic Offshore (SDOP) | |
|---|---|---|
| Tax returns | 3 most recent years — original or amended | 3 most recent years — amended only (originals must already have been filed) |
| FBARs | 6 most recent years | 6 most recent years |
| Certification | Form 14653 | Form 14654 |
| Penalty | None | 5% miscellaneous offshore penalty |
| Filing method | Paper, to the IRS Austin address in the instructions | Paper, to the same address |
| Payment | Tax + interest with the submission | Tax + interest + 5% penalty with the submission |
The difference in the returns column matters: SDOP is for people who filed but left out foreign income or information returns. Someone living in the US who never filed at all cannot use either Streamlined programme and needs a different route.
Working out the 5% penalty
The SDOP penalty base is the highest aggregate balance of the foreign financial assets subject to the penalty at any year-end within the covered period — six years for FBAR assets, three for Form 8938 assets — counting only assets that either should have been reported on an FBAR or Form 8938 and were not, or that produced income left off the return. A UK ISA worth £150,000 that was never reported can therefore generate a penalty of £7,500 on its own. Assets that were properly reported and whose income was properly declared are excluded from the base.
The non-wilfulness statement is the whole case
Form 14653 or 14654 asks you to explain, in your own words and under penalty of perjury, why you did not file: how you came to be abroad, what you understood about your obligations, who advised you, when and how you discovered the problem. This narrative is read by a person. Vague or templated statements are the most common reason a Streamlined submission attracts follow-up. It should be specific, honest and consistent with the returns attached to it.
Which one applies to you — three quick scenarios
- Moved from Boston to London in 2021, no US home since, never filed a UK-era return: SFOP. Three returns, six FBARs, no penalty.
- Lived in the US throughout, filed every year, but never reported an inherited UK bank account or its interest: SDOP. Three amended returns, six FBARs, 5% of the highest balance.
- Moved to the UK in mid-2025, filed 2023 and 2024 from the US without reporting a UK account opened on arrival: likely SDOP for now, because no year yet has 330 days abroad — waiting a year can change the answer, but waiting while knowing about the problem starts to look wilful. This is a case for advice before filing anything.